New Light Shed on Amazon’s Pursuit of Taxpayer Money

By NTK Staff | 10.20.2017 @10:37am
New Light Shed on Amazon’s Pursuit of Taxpayer Money

Money from government and taxpayers is becoming part of Amazon’s business model.

Amazon hit over $130 billion in sales last year, but as its open bidding process for a second North American headquarters unfolds, new reporting is shedding light on how important U.S. taxpayer money is to the global company’s bottom line. According to research, Amazon has received more than $1.1 billion in tax incentives at the state and county level in the United States:

Amazon has already received more than $1.1bn in tax incentives in the US at the state and county level, according to research from Good Jobs First, an advocacy group. Typically these tax breaks are to attract Amazon’s giant distribution warehouses, each one of which employs thousands of workers in low-wage hourly jobs.

Amongst the more than 100 cities bidding for the Amazon headquarters, New Jersey Governor Chris Christie set a new mark with $7 billion in tax incentives. This has led some to question and criticize the rush to provide government money as reported in today’s Financial Times:

However, a handful of cities have chosen to swim against the current and declined to apply. San Antonio, Texas, even wrote a cheeky open letter to Jeff Bezos about why it was not participating. “This public process is, intentionally or not, creating a bidding war among states and cities,” the city wrote. “Blindly giving away the farm isn’t our style.”

In San Jose, California, a city that abuts Silicon Valley and has experienced first-hand the challenges of runaway tech growth, the mayor was even more blunt. “For the most part, these subsidies are a bad deal for taxpayers,” mayor Sam Liccardo said in an interview on Fox TV. “Every city in this country is facing a tight budget . . . Whatever we are going to offer is still going to be a rounding error on the balance sheet of Amazon.”

But these economic development incentives are critical for Amazon’s bottom line. As The Wall Street Journal reported yesterday, the fact that Amazon has an “in-house economic development team shows how important tax-incentive deals have become to its business model”:

As the Seattle-based company on Thursday closes the request for proposals for its second corporate home, its in-house economic-development team shows how important tax-incentive deals have become to its business model and gives a window into why the company pitted cities against each other to win the biggest subsidy package possible.

While Amazon is considering many factors such as the labor pool, cultural fit and access to airports and major highways, its emphasis on taking advantage of incentives is part of the retail giant’s culture of frugality. Amazon’s approach differs from most other companies, which often rely on outside consulting firms to scout locations and negotiate tax-incentive deals with state and local governments. Instead, Amazon in recent years has brought those services in-house and made them the responsibility of its economic-development team, a sign of the company pouring resources into new, promising initiatives. Amazon’s team is led by specialists who come from different parts of the economic-development world. The group finds sites for new projects and negotiates tax breaks to help fuel Amazon’s rapid expansion, acting as liaisons with local and state governments.

As The Wall Street Journal noted, “the tax breaks Amazon has attained for the openings give a critical boost to Amazon’s bottom line”:

Over the past three years, Amazon has built out dozens of warehouses and hired tens of thousands of people, with plans to add 100,000 new full-time U.S. positions by mid-2018. The tax breaks Amazon has attained for the openings give a critical boost to Amazon’s bottom line. When the company ekes out a profit, it is usually small compared with its sales because the company pours money back into expansion.

As was noted yesterday on NTK, Amazon’s lobbying shop in Washington, D.C. is now amongst the biggest, and it seems the government is becoming more important to Amazon than ever before.

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